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Understanding Product Warranties

Consumer Guidance Summary

Warranties are meant to give consumers ready access to services they can count on should the product they purchase not work or perform as they expected or the manufacturer intended.

Consumers can use warranties as a way of comparing products and the federal government has rules for manufacturers about warranties to make it easier for consumers to make those comparisons. Manufacturers do not have to provide written, express warranties but if they do, here is what you should look for:

1. Insist on seeing the actual warranty

If a written warranty is offered, it must be readily available to the consumer wherever purchase is possible, including the internet.

2. Look for a single warranty document

Any written warranty must be in a single, complete, easy-to-read document; there cannot be clauses or additional conditions not part of the single warranty document and the language must be straightforward and not “legalese.”

3. Full or limited warranty?

A full warranty means: - no expense to the original purchaser should the product not perform; - the warranty cannot be limited to the original purchaser; and - if the product cannot be repaired, the manufacturer must offer full refund or replacement. Limited warranties are just that—they are limited. But all of the limitations must clearly stated in an “easy-to-read” manner that fosters warranty comparisons.

4. Get any oral promises in writing

If a sales person makes a warranty not covered in the written warranty, best to back up that verbal commitment by documenting it.

5. Don’t confuse “extended warranties” with warranties

Extended warranties are service contracts, not warranties. You pay for extended warranties or service contracts; written warranties are offered free of charge as a way of distinguishing the product in the marketplace.

6. Implied warranties cover you too

Implied warranties are created by state law and can last as long as four years. A manufacturer or retailer cannot have a written warranty that is not in compliance with a state’s implied warranty.

There is research suggesting that meaningful express warranties can be a reflection of value and quality because it is often cheaper to produce a high quality product than it is to service warranty claims for lower quality products.

Background

The 1975 federal Magnusson-Moss Warranty Act laid out the rights of consumers and obligations of manufacturers when consumer product warranties are part of a purchase. In passing this legislation, Congress wanted to:

The Federal Trade Commission (FTC) is responsible for writing the rules that govern written, express (not implied), consumer product warranties. The FTC adopted three Rules under the Act, the Rule on Disclosure of Written Consumer Product Warranty Terms and Conditions (the Disclosure Rule), the Rule on Pre-Sale Availability of Written Warranty Terms (the Pre-Sale Availability Rule), and the Rule on Informal Dispute Settlement Procedures (the Dispute Resolution Rule). The Act and the Rules can be summed up in these three requirements:

Warranty must be designated as “Full” or “Limited”

Warranty must be stated clearly and easy-to-read in a single document

Warranties must be available to consumers before they buy (including the internet, if that is where purchase is available)

Only the first one above requires any real explanation. A “Full Warranty” is defined as any warranty that:

Does not limit implied warranties (based on the common law principle of “fair value for money spent”).

Provides either full replacement or full refund, if it cannot be reasonably repaired.

Does not require any unreasonable duty of the purchaser as a precondition of receiving service. Manufacturers can get good guidance on constructing their warranties from the Bureau of Consumer Protection Business Center, “Writing Readable Warranties.”